Ebner v Official Trustee in Bankruptcy

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HIGH COURT OF AUSTRALIA

GLEESON CJ,
GAUDRON, McHUGH, GUMMOW, KIRBY, HAYNE AND CALLINAN JJ

MAXWELL WILLIAM EBNER   APPELLANT

AND

THE OFFICIAL TRUSTEE IN BANKRUPTCY     RESPONDENT

Ebner v The Official Trustee in Bankruptcy [2000] HCA 63
7 December 2000
M131/1999

ORDER

Appeal dismissed with costs.

On appeal from the Federal Court of Australia

Representation:

G T Bigmore QC with M N C Harvey for the appellant (instructed by Clayton Utz)

J B R Beach QC with M Clarke for the respondent (instructed by Deacons)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

HIGH COURT OF AUSTRALIA

GLEESON CJ,
GAUDRON, McHUGH, GUMMOW, KIRBY, HAYNE AND CALLINAN JJ

CLENAE PTY LTD & ORS   APPELLANTS

AND

AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED   RESPONDENT

Clenae Pty Ltd v ANZ Banking Group Ltd
7 December 2000
M2/2000

ORDER

Appeal dismissed with costs.

On appeal from the Supreme Court of Victoria

Representation:

F M Douglas QC with K M Connor and W D H Walsh for the appellants (instructed by McKean & Park)

D F Jackson QC with R L Berglund QC for the respondent (instructed by Blake Dawson Waldron)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

  1. GLEESON CJ, McHUGH, GUMMOW AND HAYNE JJ.   These two appeals were heard together.  In each case it was contended that the judge who heard and determined the proceedings at first instance was disqualified by reason of a shareholding in a listed public company, Australia and New Zealand Banking Group Ltd ("the Bank").  In the first case, the judge did not hold shares in the Bank personally, but was a beneficiary of a trust which held the shares.  The Bank was not a party to the proceedings, but had a financial interest in the outcome.  In the second case, the judge held the shares personally, and the Bank was a party to the proceedings.  In that case, the circumstances in which the judge came to hold the shares also gave rise to a question whether, even if the judge would otherwise have been disqualified, considerations of necessity required that he should determine the matter.

  2. Ownership of shares in a listed public company, a common form of investment, is one possible form of association between a judge and a litigant, and of potential interest in the outcome of litigation.  The facts of these two cases illustrate differences in the nature and degree of the association and potential interest that might exist.  Such possible differences are further exemplified by Dovade Pty Ltd v Westpac Banking Group[1].  In that case a bank was a party to litigation.  The trial judge was a customer of the bank, which held a mortgage over some land owned by the judge.  The judge's wife owned shares in the bank worth about $89,000[2].  There are many possible forms of association, personal, social, financial, or ideological, that might exist…

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Details
Case
[2000] HCA 63
Decision Date

CaseChat Overview and Summary

The High Court of Australia heard appeals in *Ebner v Official Trustee in Bankruptcy* and *Clenae Pty Ltd v ANZ Banking Group Ltd*. The central dispute in both cases concerned whether a judge is automatically disqualified from hearing a matter due to a shareholding in a listed public company that is a party to the proceedings or has a direct financial interest in their outcome. In *Ebner*, the judge disclosed his shareholding, while in *Clenae*, the judge inherited shares after reserving judgment and did not disclose this fact.

The legal issues before the Court were whether a judge's shareholding in a corporation, however small, automatically disqualifies them from hearing a case involving that corporation, and the principles governing the apprehension of bias. The Court also considered the implications of Chapter III of the Australian Constitution regarding the impartiality of the judiciary and the circumstances under which the principle of necessity might operate to permit a judge to continue hearing a case despite a potential conflict.

The Court reasoned that the fundamental principle is that courts must act impartially and be seen to act impartially, a requirement derived from both common law and Chapter III of the Constitution. However, it was held that a judge is not automatically disqualified by a shareholding in a listed public company. Instead, the test is whether a fair-minded lay observer, knowing the relevant facts, would apprehend that the judge might not bring an impartial mind to the issue. The Court affirmed that judges do not choose their cases and are not at liberty to decline jurisdiction without substantial grounds, as this could allow parties to improperly influence the composition of the bench. The principle of necessity was also discussed, particularly in the context of *Clenae*, where it was considered whether the circumstances justified the judge continuing to hear the case despite the inheritance of shares.

Both appeals were dismissed with costs. The Court concluded that the apprehension of bias test, rather than automatic disqualification, was the appropriate standard. In *Ebner*, it was conceded that no reasonable apprehension of bias could be established. In *Clenae*, while the judge did not disclose his inheritance, the Court found that the circumstances, including the length of the trial and the death of a key witness, supported the application of the principle of necessity, allowing the judgment to stand.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

On appeal to the Full Court of the Federal Court it was conceded that the appellant could not establish any reasonable apprehension of bias on the part of Goldberg J and that if the reasonable apprehension of bias test were the test to be applied the appeal must fail[21]. The concession was repeated in this Court. The appeal was dismissed.The facts in Clenae[22][21](1999) 91 FCR 353 at 360.[22]Clenae Pty Ltd v ANZ Banking Group Ltd [1999] 2 VR 573. The Bank sued the borrowers of a foreign currency loan. [23][1999] 2 VR 573 at 592-593.The borrowers counterclaimed, alleging negligence and unconscionability. The case was heard by Mandie J. The trial lasted 18 days. The judge reserved his decision for a lengthy period. During that period a principal witness for the Bank died. During the same period, the judge's mother also died. The judge inherited from her 2,400 shares in the Bank. The value of the shares fluctuated, the highest level being $11.45 per share. There were, at the relevant time, more than 1,508 million ordinary issued shares of the Bank, and there were more than 130,000 shareholders. The net assets of the Bank were of the order of $8,000 million. It was conceded that it could not be argued that the outcome of the case would have affected the judge's value of the shares in the Bank. That concession was examined and was held to have been correct[23]. Mandie J did not disclose his inheritance. He gave judgment in favour of the Bank. Later, the fact of his shareholding was discovered by the borrowers. They appealed to the Court of Appeal of Victoria, arguing that the trial judge was disqualified by reason of his shareholding in the Bank. Winneke P and Charles JA held that Mandie J was not disqualified by reason of any rule relating to bias or interest[24]. Callaway JA decided the case on a different ground, holding that, in the circumstances, which included the length of the trial, and the death of an important witness, it was necessary for Mandie J to deliver judgment notwithstanding the shares he had acquired by inheritance after reserving his decision. On that point the other two members of the Court agreed[25].[24][1999] 2 VR 573 at 574 per Winneke P, 593-594 per Charles JA.[25][1999] 2 VR 573 at 574 per Winneke P, 593 per Charles JA, 603-604 per Callaway JA.The principle to be applied Judges have a duty to exercise their judicial functions when their jurisdiction is regularly invoked and they are assigned to cases in accordance with the practice which prevails in the court to which they belong. They do not select the cases they will hear, and they are not at liberty to decline to hear cases without good cause. Judges do not choose their cases; and litigants do not choose their judges. If one party to a case objects to a particular judge sitting, or continuing to sit, then that objection should not prevail unless it is based upon a substantial ground for contending that the judge is disqualified from hearing and deciding the case. This is not to say that it is improper for a judge to decline to sit unless the judge has affirmatively concluded that he or she is disqualified. In a case of real doubt, it will often be prudent for a judge to decide not to sit in order to avoid the inconvenience that could result if an appellate court were to take a different view on the matter of disqualification. However, if the mere making of an insubstantial objection were sufficient to lead a judge to decline to hear or decide a case, the system would soon reach a stage where, for practical purposes, individual parties could influence the composition of the bench. That would be intolerable.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

HUGH, GUMMOW AND HAYNE JJ GAUDRON J KIRBY J (dissent) CALLINAN J (dissent)
We note that Callinan J, in relation to the third matter referred to in his reasons for judgment, has expressed the view that it would be preferable in future for challenges of apprehended bias to be determined, where possible, by a judge other than the one who has been asked to disqualify himself or herself. With respect, we are unable to agree. On that approach, for example, some other judge of the Federal Court would have considered the challenge made to Goldberg J in Ebner. Adopting such a procedure would require examination of the power of that other judge to determine the question and the way in which that other judge's conclusion would find its expression. In particular, is the question of possible disqualification to be treated as an issue in controversy between the parties to the proceeding and is it to be resolved by some form of order? The issue is not one which was argued in the present appeals, and it is sufficient to say that, in our view, Goldberg J adopted what was both the ordinary, and the correct, practice in deciding the matter himself.Conclusion Both appeals should be dismissed with costs. These appeals were heard together. They raise the question whether a judge is disqualified from hearing a matter by reason of his or her interest in shares in a listed public company when that company is party to proceedings before him or her or has a direct financial interest in its outcome. The history of both proceedings and the relevant facts are set out in the joint judgment of Gleeson CJ, McHugh, Gummow and Hayne JJ and need not be repeated. However, because of the view that I take, it is necessary to note two differences. In the first appeal, the matter was heard in the Federal Court of Australia in the exercise of federal jurisdiction[77]; in the second, the matter was heard in the Supreme Court of Victoria and, it may be assumed, in the exercise of non-federal jurisdiction[78].[77]Ebner v Official Trustee in Bankruptcy (1999) 91 FCR 353.[78]Clenae Pty Ltd v Australia & New Zealand Banking Group Ltd [1999] 2 VR 573. The other difference is that, in the first appeal, the judge who heard the matter disclosed his interest in the shares in question[79]; in the second, the judge did not[80]. Doubtless the judge's failure to disclose his interest was the result of his acquisition of the shares on the death of his mother some time after he had reserved his decision[81]. Nonetheless, his failure in that regard is a matter which necessitates specific consideration.[79](1999) 91 FCR 353 at 358 [15].[80][1999] 2 VR 573 at 581 [26] per Charles JA.[81][1999] 2 VR 573 at 580 [21]-[22] per Charles JA.Ch III of the Constitution: impartiality and the appearance of impartiality It is not in issue that the underlying principle which, on occasions, requires that a judge disqualify himself or herself is that courts must act impartially and must also be seen to act impartially. These are requirements embedded in the common law and in all developed legal systems[82]. In my view, they are also required by Ch III of the Constitution.[82]See Shetreet, "Judicial Independence: New Conceptual Dimensions and Contemporary Challenges", in Shetreet and Deschênes (eds), Judicial Independence: The Contemporary Debate, (1985) 590 at 630-631.

Ratio Decidendi

Legal Principle Established

Established by: HUGH, GUMMOW AND HAYNE JJ, GAUDRON J,

Full text does not contain this section.